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The retail landscape has been witnessing a sea change in shopping trends. With customer focus gradually shifting to online shopping, store and mall traffic has been hit hard. Retailers are now concentrating more on enhancing their omni-channel capabilities, optimizing store fleet and restructuring activities.

Moreover, steady job additions and gradual wage acceleration are undoubted signs of economic recovery. These are playing a crucial role in raising buyers’ confidence. We expect this positive sentiment to translate in to higher consumer spending that may help rev up sales.

Among the host of industries that builds up the overall Retail-Wholesale sector, we are focusing on Retail - Apparel and Shoes industry, which occupies top 34% (91 out of 265) position. Despite being placed in top 34% position, there are certain underperforming stocks in the industry that are limiting the overall growth potential of the industry.

Among these, L Brands, Inc. (NYSE:(LB - Free Report) – Free Report) is one such stock which is struggling to find space in the investors’ good books due to dwindling top and bottom-line results along with disappointing comparable store sales (comps) performance. Year to date, this Zacks Rank #5 (Strong Sell) stock has witnessed a sharp decline of 36%.

What’s Giving L Brands a Tough Time?

L Brands continues to face short-term challenges due to its decision to exit the swimwear category, which according to analysts have failed to generate desired results. A look at the company’s performance in fiscal 2017 unveils that net sales declined 7% and 5% in the first and second quarter, respectively.

Maintaining the same chronological order, we note that earnings per share fell 44% and 31%, respectively. Moreover, the second quarter marked the fourth straight quarter when the top line fell short of the Zacks Consensus Estimate.

Further, comps have also been witnessing a sharp decline in the past ten months. This specialty retailer of women’s intimate and other apparel, beauty and personal care products reported 2% drop in comps for the five-week ended Sep 30, 2017 following declines of 4%, 7%, 9%, 7%, 5%, 10%,13%, 4% and 1% in August, July, June, May, April, March, February, January and December, respectively.

Investor sentiment was further hurt after the company trimmed fiscal 2017 guidance, when it reported second-quarter fiscal 2017 results. Management projects earnings in the band of $3.00-$3.20 per share for fiscal 2017, down from the previous guidance of $3.10-$3.40. This was also below the fiscal 2016 earnings of $3.74 and fiscal 2015 earnings of $3.99. Moreover, the company anticipates the fiscal third-quarter earnings in the range of 25-30 cents, compared with prior-year quarter earnings of 42 cents.

Well it is quite apparent from above introspection that L Brands is having a tough time. But it nowhere suggests that the industry is devoid of gems.

4 Prominent Picks

Here, we have highlighted four stocks in the Retail - Apparel and Shoes space for investors on the basis of favorable Zacks Rank and sturdy fundamentals. Not only this, these stocks have outperformed the industry that has gained 3.4% in the past three months.

Abercrombie & Fitch Co.(NYSE:(ANF - Free Report) – Free Report), a specialty retailer of premium, high-quality casual apparel for men, women, and kids is a solid bet. Shares of this Zacks Rank #1 (Strong Buy) company has witnessed a sharp gain of 47.2% in the past three months and also has a VGM Score of A. Moreover, the company has an impressive long-term earnings growth rate of 14%.

Zumiez Inc. (Nasdaq:(ZUMZ - Free Report) – Free Report), a mall-based specialty retailer of action sports related apparel, footwear, equipment and accessories, flaunts a Zacks Rank #1 and has a VGM Score of B. Moreover, the company’s shares which have surged 46.5% in the past three months, has an impressive long-term earnings growth rate of 18%. In the trailing four quarters, it has reported better-than-expected earnings with an average beat of 27.1%.

Investors can bank on The Gap, Inc. (NYSE:(GPS - Free Report) – Free Report), a premier international specialty retailer, which carries a Zacks Rank #2 (Buy) and also has long-term earnings growth rate of 8%. The company registered an average positive earnings surprise of 9.3% in the trailing four quarters and has a VGM Score of A. The company’s shares have gained 32.5% in the past three months.

We also suggest investing in American Eagle Outfitters, Inc. (NYSE:(AEO - Free Report) – Free Report), a retailer of apparel and accessories. The stock has amassed return of about 20% in three months and has a long-term earnings growth rate of 8.7%. The Pittsburgh, PA-based company has delivered an average positive earnings beat of 3.4% over the trailing four quarters.

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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Strong Stocks that Should Be in the News

Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25% per year. These returns cover a period from 1988-2017. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zack Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

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